T H E I N T E R-WA R Y E A R S

1930s: SGBP during the economic and financial crisis

Although Poland was booming during the 1925-1928 period, its young economy revealed itself particularly vulnerable to the coming recession.

A collapse of 25-40% in the world price of cereals in early 1929 proved a serious setback to the purchasing power of ordinary Poles. Nevertheless, at this stage, Polish industry was still relatively prosperous and companies were exporting successfully.

In November 1929, Richard Fanta, a Vienna-based SGBP board director, signalled that rumours had recently been circulating about WBV s financial health. The rumours had ceased but there had been repercussions in Poland. Customers had been making large withdrawals from the SGBP branch in Lvov. In a few weeks these withdrawals amounted to the equivalent of $500,000. The Lvov branch manager explained that these withdrawals had been triggered by an unfounded rumour that BBE was planning to pull out of SGBP.

Despite these early rumblings of problems ahead, SGBP paid out a dividend of 8% for the financial year 1929. The situation worsened in 1930, when the money markets underwent a substantial contraction. In this situation, SGBP s lending policy became increasingly conservative. By the end of 1930, profits stood at 750,000 zlotys and the bank was still able to distribute a dividend of 6% to shareholders.

In 1930, the bank s registered head office and administrative headquarters were trans- ferred to Warsaw and the Cracow premises were reduced to the status of a mere branch.

Then, during the summer of 1931 the economic and financial crisis really swept over the bank. In its July 1931 monthly report on the economic situation in Poland, SGBP noted the impact on the Polish financial sector of the cessation of payments by the Vienna-based Oesterreichische Credit-Anstalt and the Berlin-based Darmstädter und Nationalbank. In Upper Silesia, the subsidiaries of German banks closed for a while. Polish bank deposits fell from 850 to 650 million zlotys. Polish foreign trade slid from 4.7 billion zlotys to 3.3 billion for that year.

At SGBP, total funds on fixed-term deposit and in current accounts fell from 61 to 39 mil- lion zlotys between the early May and end-August 1931. These withdrawals of deposits placed SGBP in a difficult situation, which became critical when it appeared that many companies to which the bank had made large advances or loans for capital investment purposes were no longer able to meet repayment schedules. Reacting to this emergency, BBE and parent SGB granted a loan to their Polish subsidiary. That year s profits of 700,000 zlotys were completely swallowed up by provisions to cover defaulting debtors and the weakening securities portfolio.

SGPB s balance sheet total shrank from 167 million zlotys in 1929 to 145 million in 1930 then kept falling to 101 million zlotys in 1931, 85 million in 1932, and so on. The

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